The political process on health-care reform is stymied. Despite enjoying sizable Democratic majorities in Congress, President Obama has not yet devised a health-care reform that would attract sufficient votes. To be politically viable, a bill will need at least 70 percent support to provide Democratic leaders plausible political evidence of the bill’s bipartisan nature. But this is extremely difficult when the legislation must achieve multiple and conflicting goals — extending health insurance to all, yet reducing health-care cost growth.
Powerful forces are arrayed in opposition to the president’s approach to health-care reform. Although Obama’s approach holds potential for strengthening Medicare’s finances over the medium term, some of the strongest opposition has emerged from retirees who perceive a risk of losing the generous coverage they currently enjoy.
Will seniors ever acquiesce to what Sarah Palin referred to as “death panels”? As our Cato colleague Will Wilkinson points out, that pejorative term is an inappropriate description of a necessary mechanism.
Medicare’s funding is drying up. According to Medicare’s trustees, the Medicare Part A (Hospital Insurance) trust fund will be exhausted by 2017. And Medicare Parts B and D (supplementary medical insurance and the Medicare prescription-drug plans) are growing at breakneck speeds and imposing a heavy drain on federal general revenues — which provide more than three-quarters of their funding. A key part of the solution is to rationalize the U.S. health-care system to reduce cost growth. But that would mean tighter funding constraints on Medicare.
Before Medicare was introduced, medicial decisions during seniors’ last few months were made in the context of family finances. Perceiving the financial burden on their offspring, many parents and grandparents chose to forgo expensive life-extending procedures and treatments. Public funding has changed that calculus; the costs are no longer a burden on “my children and grandchildren,” but on more nebulous and distant “taxpayers and younger generations.” But we cannot expect the government to avoid making difficult decisions.
The adoption of more stringent Medicare funding rules need not put end-of-life medical-care decisions in the hands of bureaucrats. Doctor-patient counseling and the preparation of living wills earlier in life are ways to choose among available health-care alternatives during one’s final months. But those choices must be subject to tighter constraints on public funding to restore sustainability to the federal budget.
Imposing tighter Medicare spending rules will involve establishing funding criteria on a wide variety of treatments and procedures. In each case, the decision must account for the cost and the potential for delivering real health benefits. Is a $30,000 procedure that purchases a 20 percent chance of extending by three months the lifespan of a diabetic 80-year-old worthwhile? Perhaps not. If the same procedure increases survival by two years on average for an otherwise healthy 60-year-old, does it justify public funding? Most Americans would say yes. Even Ted Kennedy’s ideal of “a uniform health-care system for all” cannot escape these sorts of discriminatory choices.
The mechanism for reducing Medicare costs proposed by the Obama administration — an advisory panel that would recommend Medicare funding criteria — won’t work, according to the Congressional Budget Office. So if cost-cutting is the goal, and we fail to introduce an appropriate mechanism to achieve it, more severe cuts in public funding of treatments will follow. Patients will be arbitrarily denied care. That is, a real “death panel” will become unavoidable.
So, having committed to not explicitly increasing taxes on the middle class, President Obama has opted for a health-care reform that would impose a stealth tax on the young. Here’s how it would work: Under an individual health-insurance mandate, all premiums would be based on average health-care costs — not on the health of the actual applicant. That is, a healthy 25-year-old pays the same premium as a middle-aged Big Mac addict, and the former’s payments subsidize the latter’s treatment. Not only is this unfair, but it would sustain today’s overly generous health-care coverage for seniors only for a little while longer.
The Congressional Budget Office already projects that, failing effective adjustments to reduce health-care costs, tax rates will have to double by 2050 to pay for the government’s existing spending commitments. Rather than work to shrink those commitments, the Obama health reform proposal would expand them—which would break the economy sooner.
— Jagadeesh Gokhale is senior fellow, and Angela Erickson is a research assistant, at the Cato Institute.